Michelle Siu/The Globe and Mail
An Ontario court decision is putting the federal government on notice about the legal risks it creates when political staff inappropriately insert themselves and run roughshod over regulatory processes.
Justice Peter Osborne of the Ontario Superior Court of Justice ruled last week that Ottawa must pay hefty damages to the original investors of Mobilicity, a former independent mobile carrier. The reason: The government arbitrarily changed its spectrum policy and repeatedly interfered in the sale of the company, causing them significant losses. (Spectrum refers to the invisible radio waves carriers use to provide cellular services.)
The case stems from a 2013 decision by the then-Harper government to retroactively change the rules governing spectrum transfers to prohibit the resale of new-entrant wireless licences to established carriers. In doing so, Ottawa reneged on representations it made to persuade investors, including U.S. private equity firm Quadrangle Group LLC and holding company Obelysk Media Inc., to capitalize Mobilicity.
Specifically, the government had provided assurances that new entrants could sell their spectrum licences to established carriers Rogers Communications Inc. RCI-B-T, BCE Inc. BCE-T and Telus Corp. T-T after a five-year moratorium period expired in 2014. Those promises of transferability, made at various times and in various forms starting in 2006, were a key inducement because they mitigated investment risk.
Instead, the government scuttled at least three takeover offers from Telus. And Mobilicity was eventually sold to Rogers for a lower price.
Although the origins of this case date back more than a decade, the ruling has contemporary relevance because the judge found the government “owed a duty of care” to Mobilicity’s investors. That finding, which builds on a similar principle in a 2022 case involving a meat-packing company, is germane to all regulators and not just those specifically associated with the telecom sector.
“At its core, this action is about the transferability of spectrum licences,” Justice Osborne wrote in his decision. “But significantly, it is also about the extraordinary and unusual conduct of Government officials with respect to the Mobilicity spectrum licences in particular.”
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Ottawa, which has until early September to appeal the decision, owes damages amounting to $555-million plus prejudgment interest and costs, said Jonathan Lisus, a lawyer for the investors.
“The Government of Canada has taken note of the Court’s decision and will review its finding carefully,” wrote Andréa Daigle, spokesperson for Innovation, Science and Economic Development Canada, in an e-mailed statement on Thursday. ISED is the government body responsible for setting spectrum policy.
“As the decision remains subject to appeal it would be inappropriate to comment further at this time,” Ms. Daigle said.
The previous Trudeau government, which inherited the case, argued in court that Ottawa did nothing unlawful and has “the discretion to change policies at any time, and to do so without any liability.”
Justice Osborne, however, deemed the government’s actions “capricious” in this case, adding “the knee-jerk reaction was not only inconsistent with sound policy but, as noted, it was not a general policy at all.”
The new Liberal government should refrain from pursuing an appeal because the optics would be poor, especially at this juncture.
Prime Minister Mark Carney is telling the world that Canada is open for business and is eager to attract new investment amid a U.S. trade war. His message, though, is only credible if his government provides more regulatory certainty to investors and refrains from erratic rule changes in all industrial sectors, not just telecom.
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An appeal in this case would signal that the Carney government also believes that it can change rules and regulations at any time without any duty of care, a position that would spook both domestic and foreign investors alike.
It would also fuel more market uncertainty about the future transferability of wireless licences for mobile carriers in particular. In 2023, ISED imposed a moratorium on “high-impact transfers” of spectrum licences. Years have passed, but that prohibition remains in place.
Why would any carrier, large or small, build out a network if there are mounting political risks to reselling the spectrum down the road?
“The case is very much about the rule of law and the honest conduct of regulators who have a lot of power,” said Mr. Lisus, the plaintiffs’ lead lawyer, in an interview.
“You see governments at various levels and at various places becoming a lot more authoritarian, dictatorial.”
U.S. President Donald Trump, for one, has proven that he has no compunction about politicizing the work of government bodies and federal regulators. His escalating tariffs stem from a similar ethos of unilateral and unpredictable government action.
Ottawa is rightly objecting to Mr. Trump’s tariffs. But it will become more difficult for Canada to argue that these are inappropriate steps for Washington to take if Ottawa appeals this case and argues that it should be able to do the same thing.
Mobilicity’s investors initiated their legal action back in 2014. The fact that it has taken 11 years for a court ruling already undercuts investor confidence that there is a path to reasonable dispute resolution in Canada.
Unfortunately, the Mobilicity case offers foreign investors a cautionary tale about the political and regulatory risks of investing in Canada. Now is the time for Ottawa to recast the narrative, not make it worse.